United States District Court, District of Columbia
July 18, 2013
TIMOTHY D. NAEGELE, Plaintiff,
DEANNA J. ALBERS, et al., Defendants
TIMOTHY D. NAEGELE, Plaintiff, Pro se, Mailbu, CA.
DEANNA J. ALBERS, Defendant, Pro se, Thousand Oaks, CA.
RAYMOND H. ALBERS, II, Defendant, Pro se, Thousand Oaks, CA.
LLOYD J. MICHAELSON, Defendant, Pro se, Westlake Village, CA.
ROBERT L. WILKINS, United States District Judge.
This Court recently issued an Order to Show Cause directing Plaintiff Timothy Naegele (" Naegele" ) to address two points. First, the Court ordered Naegele to respond to its belief that a stay of this action seemed appropriate in view of the parallel California litigation between Naegele and Defendants Deanna J. Albers and Raymond H. Albers II (collectively, " the Albers" ), presently pending in the California Court of Appeal. And second, the Court directed Naegele to explain why the Court should not conclude that he " willfully fail[ed] to appear at the arbitration hearing" before the Los Angeles Bar Association's Dispute Resolution Services (" DRS" ), within the meaning of California Business and Professions Code § 6204(a). See Naegele v. Albers , 940 F.Supp.2d 1, 2013 WL 1679957 (D.D.C. Apr. 18, 2013). Naegele timely responded on May 6, 2013 (Dkt. No. 115), the Albers submitted their views on or about June 5, 2013 (Dkt. No. 120), and Naegele thereafter replied on June 21, 2013 (Dkt. No. 121). The Court has reviewed the parties' respective submissions and has undertaken the unenviable task of familiarizing itself with the convoluted docket in this case, which reaches back nearly an entire decade to December 2003. At this point, the only pending motion before the Court is Naegele's Motion for Reconsideration, through which he asks the Court to consider his " Rejection of Arbitration Award and Motion for Trial." Finding that Naegele willfully failed to appear at the mandatory fee arbitration, the Court rules that he is not entitled to a trial de novo under § 6204, and that his Motion for Reconsideration (Dkt. No. 110)--and, in turn, his " Rejection of Arbitration Award and Request for Trial" (Dkt. No. 64)--must be DENIED. With that issue decided, the Court concludes that this action shall be STAYED in its entirety pending the final resolution of the ongoing litigation in California between Naegele and the Albers.
The Court summarized the general backdrop of this litigation in its prior Opinion and finds no occasion to recount the case's tortured history afresh. Instead, the Court presumes familiarity with the case, setting forth only those facts bearing on the Court's findings as to Naegele's non-appearance at the mandatory fee arbitration initiated by the Albers.
Naegele, an attorney, previously represented the Albers in a lawsuit he prosecuted on their behalf in the U.S. District Court for the Central District of California and, later, on appeal to the U.S. Court of Appeals for the Ninth Circuit. Thereafter, the Albers apparently disagreed with the appropriateness of Naegele's legal fees and, pursuant to California's Mandatory Fee Arbitration Act (" MFAA" ), Cal. Bus. & Prof. Code § § 6200, et seq. ,  they invoked their statutory right to mandatory fee arbitration with DRS. Naegele, it seems, had other plans.
The Albers were represented in the fee arbitration by attorney Lloyd Michaelson (" Michaelson" )--who, as it happens, also found himself entangled as a defendant in this action at one point.  Michaelson notified Naegele of the Albers' intention to proceed with mandatory fee arbitration via letter dated August 28, 2003. ( See Dkt. No. 120 at ECF pp. 15-16) (" [T]his correspondence is intended to place you on notice of the Albers['] intent to pursue their rights under the State Bar's Mandatory Fee Arbitration Program." ). On September 4, 2003, Naegele's attorney, Lawrence Strauss, responded to Michaelson via letter, essentially disputing the Albers' ability to pursue fee arbitration under the MFAA; instead, Mr. Strauss emphasized the venue selection clauses included in various written fee agreements between Naegele and the Albers, directing that any disputes shall be litigated in the District of Columbia. ( See id. at ECF pp. 18-19). Thereafter, on October 3, 2003, Naegele emailed the Albers directly and acknowledged receipt of Michaelson's letter, although he avoided mentioning (perhaps strategically) the Albers' impending fee arbitration. ( See id. at ECF p. 43).
Naegele does not dispute this chain of events whatsoever. Instead, he coyly attempts to justify his actions by asserting that " [t]he first time [he] received a letter from the Los Angeles County Bar Association's Dispute Resolution Services--which is responsible for commencing or initiating the arbitration process--was on December 23, 2003, after the instant lawsuit had been filed." (Dkt. No. 115 at ECF p. 117 ¶ 4). This may be true, but in the Court's view, Naegele's carefully-crafted assertion misses the bigger picture. Even if the Albers' fee arbitration had not officially " commenced," as Naegele seems to suggest, he knew full well that they were in the process of asserting their rights under the MFAA. He proceeded to file this lawsuit anyway, presumably in an effort to win the proverbial " race to the courthouse."  To make matters worse, even as the Albers subsequently struggled to preserve their MFAA rights by filing notices of stay in the instant action, Naegele's contumacious conduct continued. Naegele moved to
strike the Albers' stay notices, he sought the entry of default against the Albers (and Michaelson), he moved for Rule 11 sanctions against both the Albers (and Michaelson), and more, until Judge Urbina ultimately stayed this action for the first time on January 3, 2005.
Meanwhile, Naegele's " participation" in the DSR arbitration proceedings was no more commendable. Upon being formally notified of the arbitration proceedings, Naegele objected to the " jurisdiction" of DRS over his fee dispute with the Albers, relying on the above-referenced venue selection clauses. ( See, e.g. , Dkt. No. 8-1). In response, both the Deputy Chair and the Chair of the L.A. County Bar Association's Attorney-Client Mediation and Arbitration Services reviewed and overruled Naegele's objections, concluding that DRS did, in fact, possess jurisdiction over the fee dispute under the MFAA. ( See Dkt. Nos. 56-6, 56-7).  Despite these findings, Naegele's defiance of the arbitration proceedings persisted. Naegele submitted a " Memorandum Regarding the Absence of Jurisdiction" to the arbitration panel on April 29, 2004, continuing to contest DRS's jurisdiction. ( See Dkt. No. 115 at ECF pp. 122-129). Moreover, according to Michaelson's sworn affidavit, the Albers requested in discovery a copy of Naegele's litigation file covering the Albers' case, but Naegele never produced that file, even after the Albers filed a motion to compel and secured an order from the arbitration panel directing Naegele to comply. ( See Dkt. No. 120 at ECF p. 12 ¶ 4). Naegele does not dispute these assertions.
Most significantly, Naegele failed to appear for the arbitration hearing on November 17, 2004. While Naegele's attorney, Mr. Strauss, appeared, Naegele was nowhere to be found, effectively precluding both the Albers ( vis-à-vis Michaelson) and the arbitration panel from examining or questioning him during the hearing. Instead, Naegele prepared a " written statement for the record" continuing to contest the panel's jurisdiction and indicating, inter alia , that he would " consider responding only in writing to questions submitted by [the arbitration panel] or anyone else." (Dkt. No. 120 at ECF p. 33 ¶ I.D).
The arbitration panel subsequently rendered its award on January 14, 2005. ( See Dkt. No. 92-3). In addition to finding in the Albers' favor, the panel separately found that Naegele " willfully failed to appear at the hearing for non-binding arbitration and produce documents as required under the Rules, and should not be entitled to a new trial after arbitration pursuant to Rule 40 of the Rules For Conduct of Arbitration of Fee Disputes and Other Related Matters for the Los Angeles County Bar Association Dispute Resolution Services, Inc." ( Id. at ECF p. 25). The arbitration panel made other express findings to this effect, as well:
[T]he conduct of Naegele upon learning of the decision of John S. Chang, Presiding Arbitrator for the State Bar of California Office of Mandatory Fee Arbitration, that this panel did have jurisdiction to adjudicate the fee dispute between Albers and Naegele, in not appearing as he was compelled to do, and in refusing to produce the Albers' file as he was required to do by Business and Professions Code 6200 applicable to the arbitration hearing, was willful.
(Id. at ECF p. 24). Before rendering its willfulness finding, it appears the panel offered Naegele a chance to explain why
his non-appearance at the hearing should not be construed as willful, and Mr. Strauss sent a response on November 22, 2004, claiming that " [a]ny suggestion that Mr. Naegele willfully failed to appear is untrue." (Dkt. No. 115 at ECF p. 111). As set forth therein, Naegele justified his non-appearance as follows:
Because [the panel] [did] not have jurisdiction to decide [the] case, the Notice to Appear and Produce Documents was properly objected to and not acted upon by Mr. Michaelson, and the basic requirements of due process [had] been denied to [Naegele], there was no reason for Mr. Naegele to attend and he acted on the advice of counsel. Thus, it is indisputable that he did not willfully fail to appear.
(Id. at ECF p. 112). The panel, much like this Court, was unconvinced.
Following issuance of the arbitration award, Naegele filed a " Rejection of Arbitration Award and Request for Trial" in this Court on February 22, 2005, invoking § 6204.  (Dkt. No. 64). Judge Urbina initially denied Naegele's " Request for Trial" without prejudice on August 8, 2005, and Naegele has since filed a Motion for Reconsideration, asking the Court to revisit his " Request for Trial." The case was then transferred to the undersigned, and the Court recently issued an Order to Show Cause directing Naegele to address two issues: (1) why the Court should not stay this action, and (2) why the Court should not find that he willfully failed to appear at the arbitration hearing. Both Naegele and the Albers submitted responses, and the Court now addresses both of these issues.
A. Naegele Willfully Failed to Appear at the Arbitration Hearing
California's Legislature " created the MFAA as a separate and distinct arbitration scheme applicable to disputes between clients and attorneys over legal fees, costs, or both." Rosenson v. Greenberg Glusker Fields Claman & Machtinger LLP , 203 Cal.App.4th 688, 693, 137 Cal.Rptr.3d 489 (Ct. App. 2012). As explained by the California Supreme Court, the MFAA was " designed to alleviate the disparity in bargaining power in attorney fee matters which favors the attorney by providing an effective, inexpensive remedy to a client which does not necessitate the hiring of a second attorney." Maynard v. Brandon , 36 Cal.4th 364, 377, 30 Cal.Rptr.3d 558, 114 P.3d 795 (2005) (internal citation and quotation marks omitted). " One of the distinct characteristics of arbitration under the MFAA is that it is voluntary for the client and mandatory for the attorney if commenced by the client." Loeb v. Record , 162 Cal.App.4th 431, 442, 75 Cal.Rptr.3d 551 (Ct. App. 2008). That is, " whereas a client cannot be forced under the MFAA to arbitrate a dispute concerning legal fees, at the client's election an unwilling attorney can be forced to do so." Aguilar v. Lerner , 32 Cal.4th 974, 984, 12 Cal.Rptr.3d 287, 88 P.3d 24 (2004).
Under the MFAA, arbitration is " nonbinding unless the parties agree in writing to make it binding." Glaser, Weil, Fink, Jacobs & Shapiro, LLP v. Goff , 194 Cal.App.4th 423, 439, 125 Cal.Rptr.3d 26 (Ct. App. 2011). Absent such an agreement, either party dissatisfied with the arbitration may generally seek a trial de novo within 30 days of the arbitration proceedings. § 6204(a). If there is an " action
pending," then " the trial after arbitration shall be initiated by filing a rejection of arbitration award and request for trial after arbitration in that action within 30 days after mailing of the notice of the award." § 6204(c); see also Schatz v. Allen Matkins Leck Gamble & Mallory LLP , 45 Cal.4th 557, 566, 87 Cal.Rptr.3d 700, 198 P.3d 1109 (2009). By timely and properly seeking a trial after arbitration, it is " essentially as if no arbitration had occurred." Maynard , 36 Cal.4th at 373-74 (" [A] request for a trial after arbitration nullifies an award issued by an arbitration panel." ). Conversely, " an arbitration award rendered under the MFAA becomes binding if not challenged by the proper procedure," and the statute " places the burden on the party dissatisfied with the arbitration award to take steps to prevent the award from becoming binding." Loeb , 162 Cal.App.4th at 443.
Notably, the MFAA's trial de novo procedure is subject to one important exception: " [I]f either party willfully fails to appear at the arbitration hearing . . . that party shall not be entitled to a trial after arbitration." § 6204(a). Under the statute, " [t]he determination of willfulness shall be made by the court," although in reaching its determination, " the court may consider any findings made by the arbitrators on the subject of a party's failure to appear." Id.; see also Liska v. The Arns Law Firm, 117 Cal.App.4th 275, 285, 12 Cal.Rptr.3d 21 (Ct. App. 2004). In addition, " [t]he party who failed to appear at the arbitration shall have the burden of proving that the failure to appear was not willful." § 6204(a).
With these standards in mind, the Court finds that, although Naegele filed a timely rejection of award and request for trial, he is not entitled to a trial de novo from the Albers' fee arbitration proceedings because he willfully failed to appear at the arbitration hearing. 
To begin with, there is no dispute that Naegele failed to attend the arbitration hearing, nor is there any dispute that Naegele was aware that the arbitration hearing was scheduled to take place on November 17, 2004. As set forth in Michaelson's affidavit, he served Naegele with a " Notice to Appear" at the arbitration on November 17, 2004, pursuant to which Naegele was to personally appear at the hearing, along with a copy of the Albers' litigation file. ( See Dkt. No. 120 at ECF p. 12 ¶ 5).  Despite this, Naegele
failed to appear at the hearing, choosing instead to submit a " written statement" on his own behalf, through which he confirmed that he would not personally appear at the November 17th hearing date and that he " will consider responding only in writing to questions submitted by [the panel] or anyone else." ( See id. at ECF pp. 33-39) (emphasis added). In view of these facts, the Court has no trouble finding that Naegele was fully aware of the arbitration hearing, and that he failed to appear notwithstanding.
While the Court recognizes that Naegele's attorney, Mr. Strauss, did attend the hearing and made some semblance of a presentation on Naegele's behalf, this does not excuse or obviate the failure of Naegele--the actual party to the proceedings--to personally appear. By refusing to participate in the arbitration proceedings and attend the hearing himself, Naegele substantially complicated the panel's ability to effectively and efficiently adjudicate the dispute, and he completely precluded the Albers from cross-examining him and from otherwise obtaining information that was critical to their case--most notably, a copy of their litigation file from Naegele. Indeed, despite Mr. Strauss' attendance, the arbitration panel expressly noted the limited benefit of his involvement in the absence of his client, Naegele:
[Mr.] Strauss made an opening statement and final argument, and cross-examined the Albers. He presented a written statement by Naegele and a copy of the fee agreement. He denied knowledge of the whereabouts of the Albers file, and why Nagele failed to appear for arbitration, except to say that Naegele continued to contest the jurisdiction of this arbitration process.
It would have been extremely helpful to the panel to have Naegele's direct testimony as well as his testimony under cross-examination, and beneficial to the panel to have Naegele produce the entire file for which he billed the Albers $782,880.52 in prosecuting the actions to a dismissal on technical grounds.
(Dkt. No. 92-3 at ECF p. 24). The Court thus finds that Naegele knowingly failed to appear at the arbitration hearing within the meaning of § 6204(a), which means that the only remaining question is whether Naegele's failure to appear was willful.
The Court easily concludes that it was. Naegele fails to provide any meaningful or legitimate explanation for his absence, instead describing this issue as a " red herring." As Naegele sees things, " [b]ecause [he] declined binding arbitration, and the arbitration proceedings were 'illegal'--owing to the absence of jurisdiction and the arbitrators' failure to compel arbitration--there was no reason, much less a legal requirement for [Naegele] to attend the arbitration hearing." (Dkt. No. 115 at ECF p. 13). The Court disagrees, and Naegele's purported justification only serves to confirm the Court's assessment--his refusal to appear was deliberate.
In addition, while there is little precedent addressing the concept of " willful failure to appear" within the meaning of § 6204(a), the few cases that the Court was able to locate add support to its conclusion. In Isaacson v. Maatuk , the California Court of Appeal affirmed the trial court's conclusion that an attorney willfully failed to appear at an MFAA arbitration where the attorney, who had received notice of the hearing, did not appear and notified the arbitrator on the day of the hearing that he was " engaged on another matter and was not available for the arbitration." Id.
, No. B224217, 2011 WL 3211110, at *3, *4-6 (Cal. Ct. App. July 28, 2011). In so concluding, the court rejected the proposition that a reviewing court must " make a finding of premeditated, intentional
and purposeful action," explaining instead that it is the non-appearing party's
" obligation to prove this his failure to appear was not willful." [WL] at *4-5. Similarly, in Langdell v. Steinberg , the California Court of Appeal " defer[red] to the Superior Court's implicit determination that [a] failure to appear was willful," where the party requested a continuance of the hearing due to prescheduled travel and subsequently did not appear when the arbitrators refused to continue the hearing. See id.
, No. A132292, 2012 WL 3578599, at *1, *4 (Cal. Ct. App. Aug. 21, 2012). In the Court's view, these cases bolster the conclusion that Naegele's failure to appear at the arbitration hearing was willful--indeed, the willfulness of Naegele's conduct is even more apparent than in Isaacson or Langdell . Naegele has never asserted that he was facing scheduling difficulties or had some other obligation on November 17, 2004, nor did he ever contact the arbitration panel to seek a continuance of the hearing, as was alleged in those cases. Instead, Naegele made a calculated, deliberate decision not to appear at the hearing (albeit ostensibly based on his belief that the arbitration lacked jurisdiction and that he was not required to appear).  In the Court's eyes, Naegele's actions were indubitably willful. 
Finally, although not bound by the arbitration panel's findings, the MFAA expressly permits the Court to consider those findings " on the subject of a party's failure to appear." § 6204(a). In this case, the arbitration panel found as follows:
Naegele did not personally appear at the arbitration hearing, although he was served on October 15, 2004 with a Notice to Appear and Produce Documents at Arbitration in Lieu of Subpoena pursuant to Civil Code Section 1987(b) by the Albers' attorney. Previously, on a Motion by the Albers, the arbitration panel ordered that Respondent Naegele produce the Albers' file in regard to the arbitration proceeding. This was never done.
* * * *
[T]he conduct of Naegele upon learning of the decision of John S. Chang, Presiding Arbitrator for the State Bar of California Office of Mandatory Fee Arbitration,
that this panel did have jurisdiction to adjudicate the fee dispute between Albers and Naegele, in not appearing as he was compelled to do, and in refusing to produce the Albers' file as he was required to do by Business and Professions Code 6200 applicable to the arbitration hearing, was willful.
(Dkt. No. 92-3 at ECF p. 24). The panel reiterated these findings elsewhere in the award:
The panel finds Naegele willfully failed to appear at the hearing for non-binding arbitration and produce documents as required under the Rules, and should not be entitled to a new trial after arbitration pursuant to Rule 40 of the Rules For Conduct of Arbitration of Fee Disputes and Other Related Matters for the Los Angeles County Bar Association Dispute Resolution Services, Inc.
(Id. at ECF p. 25). Again, while the findings of the arbitration panel are concededly not binding or dispositive, the Court nevertheless finds it significant that the panel's assessment is consistent with the Court's, particularly since the panel was obviously much more closely involved with Naegele's conduct throughout the arbitration proceedings. 
In sum, the Court concludes that Naegele willfully failed to appear at the arbitration hearing on November 17, 2004, which means that he is unable to pursue a trial de novo and that the award rendered by the arbitration panel is binding. § § 6203(b), 6204(a).
B. The Court Stays This Action Pending Completion of the California State Court Litigation Between Naegele and the Albers
With that issue decided, the Court concludes, for the reasons laid out in its earlier Opinion, see Naegele , 2013 WL 1679957, at *4-8, that the most appropriate course of action at this point is to stay this action pending a final outcome of the California litigation that remains ongoing between Naegele and the Albers. As set forth in the accompanying Order, the parties are directed to file a status report with the Court once the Second Appellate District of the California Court of Appeal issues its decision in Albers, et al. v. Naegele, et al. , Case No. B240455, and the Court will make a determination as to how best to proceed at that time. 
For the reasons explained herein, the Court concludes that Naegele willfully failed to appear at the arbitration hearing initiated by the Albers under the MFAA, which means that his Motion for Reconsideration and Request for Trial under § 6204(a) must be DENIED. In addition, the Court finds that this action should otherwise be STAYED in its entirety pending the completion of the ongoing California
litigation between Naegele and the Albers.